- The employee retention credit is for employers who lost revenue or had to close during COVID-19.
- The credit is based on wages paid from April 1, 2020, to September 30, 2021
- Employers who didn’t claim the credit can request a F-941 refund
- You can claim the F-941 refund by amending Form 941
- There are significant backlogs
- The IRS is more than a year behind on processing refund claims
- You can check the status of your refund over the phone or online
- You should expect to wait a long time for your F-941 refund
- Don’t lose hope – the refund will come
The Internal Revenue Service offered a very lucrative payroll tax credit to employers who lost revenue or had to shut down completely or partially during the COVID-19 pandemic. The credit was available on wages paid from April 1, 2020, to September 30, 2021, and recovery start-up businesses were allowed to claim the credit on all wages paid through the end of 2021. Companies that didn’t claim the credit right away can claim it retroactively by applying for an F-941 refund.
The F-941 (or F941) refund puts money back into your pocket. You can use the refund to cover business operations, but if you run a pass-through business such as a sole proprietorship or a partnership, you could alternatively just pocket the funds.
Claiming a F-941 refund is pretty straightforward, but you may end up waiting a long time for the refund. That can be frustrating, but it’s worth the wait.
This guide is designed to help you by explaining the filing process and rules for claiming an F-941 refund. It then explains how to check form 941 refund status.
What Is an F-941 Refund?
An F-941 refund is a retroactive refund of a COVID-19 payroll tax credit. The payroll tax credit was available during the last three quarters of 2020 and the first three quarters of 2021 and was designed to help employers offset wage expenses during the pandemic.
Employers who claimed the credit on their original payroll tax returns were able to use the credit to offset their payroll deposits. They didn’t have to make as many payroll deposits if they had earned a credit.
People who didn’t claim the credit on their 941 forms filed during 2020 and 2021 can request a refund. They must wait for the IRS to send them the refund, however. It won’t be an automatic credit, as it was for people who claimed it on their original returns.
These employers also must continue to make payroll tax deposits. They cannot use a potential refund to offset their payroll tax deposits.
How to File for an F-941 Refund
You must amend your 941 payroll tax forms if you want to claim an F-941 refund, and you will want to first make sure you meet the requirements to claim the credit. A tax professional or employee retention credit expert can help you assess your qualifications. You can, then, work through these steps:
1. Find Form 941-X
The IRS uses an “X” to indicate the amended version of a tax return. You should use the same form number you initially filed followed by an X if you want to amend a return.
This means that quarterly filers should use a 941-X while annual filers, in contrast, will use a 944-X. This only applies to employers who pay small amounts (under $1,000 in a year) in payroll taxes.
Fishers and farmers can use Form 943-X, as they usually report payroll taxes on Form 943. Make sure you choose the correct year in addition to the proper form. The IRS changes its forms from year to year.
2. Get a Form for Every Quarter You Want to Amend
You will need a separate 941-X form for each quarter you want to amend. This means you may need to file up to six different forms: one for each of the last three quarters in 2020 and one for each of the first three quarters in 2021. Annual filers need to use a separate form for each year they’re making a claim.
3. Copy Your Original Filing Details
The core information you include on Form 941-X (or any other amended payroll tax form) should be the same as you put on your original form. The wages paid and deposits made, for each quarter, for example, will be the same. The only difference will be that you’re claiming the credit and using it to claim a refund.
You can make other changes as needed. Say, for example, you discover you made a mistake on your original return. You can correct that when you amend the return. You shouldn’t make any changes, however, if you’re refiling only to claim the employee retention credit.
4. Fill Out the Worksheets as Needed
The IRS has a series of worksheets you will need to calculate the credit for your F-941 refund. Here are the credits that you can calculate with each worksheet.
- Worksheet one: Credits for qualified sick and family leave wages for leave taken after March 31, 2020, and before April 1, 2021.
- Worksheet two: Employee retention credit for wages paid after March 12, 2020, and before July 1, 2021.
- Worksheet three: Credits for qualified sick and family leave wages for leave taken after March 31, 2021, and before October 1, 2021.
- Worksheet four: Employee retention credit for wages paid after June 30, 2021, and before January 1, 2022.
- Worksheet five: Credits for COBRA premium assistance.
Note that the employee retention credits aren’t the only option. You may be able to get additional credits if you paid qualified family and sick leave wages or provided COBRA assistance. Those credits can also come to you as an F-941 refund.
5. Note the date you discovered the errors
You must note the date you discovered the errors when you file an amended Form 941. This typically applies when people realize they have made a filing error and they’re trying to correct it with an amended return.
You should use the date you became aware of your eligibility for the employee retention credit in this situation. This isn’t the same as an error, per se, but it is when you became aware of the need to amend your return.
6. File by mailing the form to the correct address
You cannot amend Form 941 by e-filing. You will need to print paper copies of your amended returns and mail them in to request your F-941 refund status. You will send the forms to either Utah or Ohio, depending on where your business is located. Make sure you choose the right location to avoid processing errors.
It’s critical to make sure you send in these forms by the correct deadline. You have three years from the filing due date to request a refund. Form 941 for the second quarter of 2020, for example, was due on July 31, 2020.
That means you have until that same date in 2023 to request a refund. You can amend after that date, but you won’t be able to claim a refund.
When Will I Get the Refund? How to Check Form 941 Refund Status
Many people want to know when they will get their refunds. These credits can be worth tens of thousands of dollars for each employee, but unfortunately, it’s taking the IRS a long time to process the claims.
The CARES Act created the employee retention credit in March 2020, but the IRS didn’t start processing claims until a year later. The IRS also suspended processing a couple of times since then to refine processes and focus on training.
You should expect a long wait time if you have sent in a request for an F-941 refund. The IRS has 4.2 million backlogged 941 forms as of September 2022, and there are also over 200,000 unprocessed 941-X forms.
Some of the 941-X forms can’t be processed until the IRS processes the original 941 forms. You are not alone if you’re waiting for a refund, but luckily, you can check on your refund using these tips.
1. Send the Amended Forms via Certified Mail
The IRS won’t alert you when the agency receives your amended return. Consider using certified mail to track the package so you will know when the IRS receives it. This strategy only works if you haven’t mailed your forms yet.
2. Call the IRS
You can call the IRS’s general phone number and weave through the phone tree to try to get a person, but rather than calling the main number, try the number for amended returns. The IRS phone number to check on the status of amended returns is 866-464-2050. Make sure to have your business EIN and a copy of an old tax return on hand to verify your identity.
3. Create an Online IRS Account
An online IRS account gives you access to most of your tax information. You can see information from the returns you have filed and request copies of your returns or transcripts of information, such as the details on your wage and income statements or 1099 forms. You can also check the payments you have made and the refunds you earned.
Setting up an online account requires you to verify your identity. You need your ID and a video camera or a smartphone that can take a selfie. The online account won’t show you if the amended form is, but once the IRS issues an F-941 refund, the refund should show up on your account.
The good news about waiting for an F-941 refund is that you might earn some interest. The IRS pays interest when it has your money.
The interest will accrue on the balance from the day you overpaid until the day the IRS cuts you an F-941 refund check. The interest is not a lot, but it’s a silver lining for people who are waiting a long time.
Common Pitfall to Avoid When Checking on an F-941 Refund
Waiting for an F-941 refund can be frustrating, especially when you could use the extra funds. You want your refund as fast as possible, but unfortunately, there isn’t a lot you can do to speed up the process. Protect yourself by avoiding the following pitfalls.
- Don’t submit another form: Mailing unnecessary forms can lead to even longer processing delays or mistakes.
- Don’t yell at the IRS employees: You may be frustrated, but the IRS employees don’t make the rules. Try to stay calm if you reach a live person.
- Don’t expect your accountant to know: Your accountant can amend forms and give you information about processing delays, but even they don’t know when the IRS will catch up on the F-941 refunds.
- Don’t give up hope: The processing can take a long time, but the IRS will eventually get to the form.
Don’t stop making payroll deposits while you’re waiting for your refund. You know the IRS has your money, but unfortunately, that doesn’t mean you can stop making payroll deposits. Failure to make these deposits on time can lead to fines and penalties.
Contact ERC Today for Help with F-941 Refunds
Claiming F-941 refunds can be a complicated process. It’s hard for individuals, but it’s also tricky for tax pros who don’t deal with this refund regularly. ERC Today has the experience you need if you want to claim an F-941 refund on wages paid during the COVID-19 pandemic.
We can help you assess your eligibility and file the forms to claim this refund. Don’t miss the deadline, and don’t forgo this opportunity. See if you qualify and contact us for help today.